Electrocomponents growth accelerates after bumper first half

The FTSE 250 company said its headline operating profit for the period was £81.2m - a 40.7% rise on a reported basis and a 29.3% uptick on an underlying basis.

Its headline operating margin was up a reported 1.7 percentage points and an underlying 1.4 percentage points to 9.9%, with its headline profit before tax reaching £79m - up a reported 43.4% and an underlying 31.3%.

Headline earnings per share were 13p - a 29.9% underlying improvement, or a 42.9% rise as reported.

The firm’s headline free cash flow was down a reported 71.9% and an underlying 72.4% at £17.4m, while net debt dropped to £124.5m from £140.9m.

Electrocomponents said its leverage was 0.7x EBITDA, down from 1.0x at the same time last year, while its interim dividend was confirmed at 5.25p per share, a 5% rise on 12 months ago.

The company’s reported profit before tax was £75.7m - up 38.9% - while reported earnings per share rose 37.8% to 12.4p.

“We delivered a strong performance in the first half with double-digit top line growth in all five of our regions, improved gross margins, and significant growth in profits,” commented chief executive officer Lindsley Ruth.

“We are making good progress on our journey to become first choice for customers, suppliers and employees and the opportunity for further growth and improvement remains significant.”

Ruth said the business was an “energised” one with “real momentum”, investing in its people, innovation and brands and continuing to focus on what customers value.

“We remain committed to driving value for our shareholders and we are excited by the potential.”

On the operational front, Electrocomponents said its rolling 12-month net promoter score rose by 8.4% to 43.8, which the board said demonstrated “improved” customer satisfaction, adding that its digital marketing strategy and improved online experience drove 14% underlying growth in digital revenue.

RS Pro underlying revenue growth was 10% in the first half, with growth seen to accelerate to 11% in the second quarter compared to 8% in the first.

The board also reported a “significant” step forward in Asia, with all sub-regions in growth and losses reduced to £2.3m from £5.4m at the end of the 2017 financial year.

Electrocomponents said it was on track to deliver £30m of cumulative annualised cost savings by March.

Looking at its current trading, the company said it made an “encouraging start” to the second half of the year, with all regions seeing continued strong underlying revenue growth in October.

“Our markets currently remain strong but as ever our forward visibility remains limited and our trading comparatives will toughen as the year progresses,” the board explained in its statement.

“As such, we are focused on driving market share gains by delivering an excellent customer experience and investing to support continued long-term growth of the business.”